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Corporate Plan


The Corporate Plan highlights the AOFM’s core objectives and main activities for the year ahead, together with an account of emerging challenges and issues to be monitored and/or managed over the 2019-2023 reporting periods.

The AOFM annual corporate planning process involves a review of its approach to managing the year in prospect, including a review of the ongoing relevance of its performance indicators, together with the risks and opportunities presenting to the AOFM. The Corporate Plan guides the development of corporate project plans and annual Business Group plans, both of which set the context for individual performance expectations.

Organisational performance against the Corporate Plan is monitored using key performance indicators, and regular updates on the progress of corporate projects.

The Corporate Plan is required by paragraph 35(1)(b) of the Public Governance, Performance and Accountability Act 2013.


Acknowledged for excellence in sovereign financial management.

Purpose (Mission)

To ensure the Government’s debt financing needs are fully met each year while managing the trade-offs between cost and risks for the cash and debt portfolios over the medium-long term. The AOFM will also take into account the potential for its operations to impact domestic financial markets.

Objectives (Delivery)

  1. Meet the budget financing task in a cost-effective manner subject to acceptable risk.
  2. Facilitate the government’s cash outlay requirements as and when they fall due.
  3. Be a credible custodian of the Australian Government Securities (AGS) market and other portfolio responsibilities.


The key functions underpinning AOFM’s role are:

  • issuing AGS in accordance with Government policy objectives (such as promoting sovereign bond market liquidity);
  • managing the aggregate daily cash balances in the Government’s Official Public Account;
  • managing financial assets according to policy directives as they arise from time-to-time, or as part of broader portfolio management;
  • the settlement and payment of Commonwealth financial obligations on AGS;
  • maintaining a capacity to provide specialist advice within government on debt financing (including related financial market matters) and balance sheet management;
  • developing risk assessments to undertake cost effective management of the debt and asset portfolios;
  • where appropriate, supporting the efficient operation of the Australian financial system; and
  • to support implementation of the Australian Business Securitisation Fund (ABSF) in accordance with Government policy.

Guiding principles (AOFM values)

The AOFM, as the interface between Government and financial markets is required to exercise considerable judgement. It is necessary to balance the pursuit of government objectives and community outcomes with an understanding of the incentives that drive financial market participants. In this regard, it is important that the AOFM is seen in its day-to-day dealings to be:

  • of the highest integrity – we consistently act in a professional, respectful, transparent and impartial manner that will withstand scrutiny;
  • results focussed – we demonstrate a thorough understanding of our responsibilities and take pride in our work, owning decisions that we make;
  • responsive – we consult carefully and demonstrate initiative and the ability to adapt to changing circumstances; and
  • clear – we communicate in a straightforward and timely manner.

Organisational structure

Consistent with financial industry best practice, the AOFM operates an overall structure that provides for an appropriate segregation of transaction related duties. Appropriate governance arrangements control and monitor operational aspects of AOFM activities to ensure the highest level of integrity in all outcomes.

The AOFM Front Office comprises the core operational activities of strategy, markets and funding.  This involves portfolio and global market research (including monitoring and anticipating regulatory impacts on financial markets), investor engagement, advisory services, conduct of the ABSF and issuance transaction design and execution. The Front Office interfaces with financial markets in order to effectively achieve AOFM’s financing and portfolio management responsibilities.

The Middle Office comprises enterprise risk, assurance, performance reporting, and IT strategy. Associated activities support risk and compliance monitoring and facilitate risk owners in managing risks (including separation of the back and front office functions). The Middle Office also administers controls in various business critical systems, maintains business databases that support monitoring and reporting on AOFM business activities and manages broader IT issues through the shared service relationship with Treasury.

The AOFM Back Office comprises accounting services, settlements, administrative support and the office of the CEO. Business operations provide accounting services and transaction settlements. Administrative functions and support to the Chief Executive sit within a Corporate Development business unit. Advice on issues regarding the AOFM’s staff development objectives and APS-specific issues are provided directly to the Chief Executive by a senior advisor role.

The Audit Committee reports directly to the CEO and reviews financial and performance reporting, risk oversight and management, and internal controls. Members of the Audit Committee are not officials or employees of AOFM with the exception of the Chief Risk and Compliance Officer.

AOFM Organisational Structure

Operating Environment


The Treasurer is responsible for administering legislation associated with debt management, and has the power to authorise the investment of public funds for the purpose of asset management. The Department of the Treasury is responsible for borrowing money on the public credit of the Government and for administering the legislation relating to this responsibility. As such, the Secretary to the Treasury is accountable for implementation of the debt management mandate and looks to the AOFM to provide technical and strategic advice on related matters.

The AOFM Chief Executive Officer is accountable to the Secretary and to the Treasurer for the execution of debt management strategies and the achievement of financing tasks on behalf of the Government through the AOFM’s annual issuance programs.

External environment

The AOFM is a price taker in global capital markets and therefore its strategy and issuance activities are shaped largely by the environment in which it operates. A broad range of external factors impact the costs and risk of how the AOFM meets the Government’s financing needs. Issuance cost, investor demand and possible disruptions to the AOFM’s access to financial markets influence its assessment of how best to meet its debt and cash management obligations. This includes the timing and choice of issuance method as well as the funding mix it chooses. This requires developing an outlook that necessarily involves a high degree of uncertainty in relation to any specific event when framing a strategy for the year ahead.  Therefore, the strategy needs to be suitable for a wide range of plausible outcomes, while conditions at any point in time determine how the strategy is implemented.

In order to better understand the global market environment, which will to a considerable extent determine investor preferences for AGS relative to alternative assets (such as US Treasuries for example), the AOFM maintains an active research program as well as an ongoing dialogue with market participants (including domestic and offshore investors, intermediaries, the RBA and other sovereign debt issuers through OECD channels). The AOFM also works closely with Treasury in order to understand the potential for and likelihood of changes to the Government’s future financing needs. In planning for the 2019‑20 issuance strategy, the AOFM has again assessed an ongoing prospect of global market conditions remaining challenging (not the least because AGS could continue to be an expensive investment alternative compared to similar assets elsewhere).  However, lower net-financing tasks over the next few years will offset this through a moderation in funding risks.

While global economic growth has stabilized in 2019 (after slowing through the second half of 2018), pessimism surrounding the ongoing resiliency of the expansion has risen reflecting the escalation of regional trade tensions (including the imposition of tariffs) and rising geopolitical uncertainty. This has seen monetary authorities in several major advanced economies pivot towards an easing bias, despite still reasonable levels of growth and relatively robust labour market conditions. The United States continues to outperform the rest of the developed world with above trend growth and is broadly assessed as operating at full capacity.  The outlook for China is less certain although the recent combination of fiscal and credit stimulus is likely to lift domestic growth and counterbalance the more negative outlook for the trade sector.  In the euro area, trade and BREXIT uncertainty continue to weigh on the outlook despite reasonably strong levels of employment growth and domestic demand.  Generally speaking, heightened uncertainty around the growth outlook in major economies will tend to push investors toward low-risk, high quality government bonds.  On the other hand, the prospect of easier monetary policy settings will provide an incentive for investors to look for higher yielding investment options.  The fact that circumstances in the US currently stand in contrast to the other major regions complicates this picture further.

In this regard, the US Fed lifted the Federal Funds Rate four times in 2018. However, market volatility over the end of 2018 and into the start of 2019 prompted the Fed to make appreciably more dovish comments with markets responding by pricing in a lower interest rate path. In June 2019, the Fed signaled its openness to cutting interest rates in reference to potential fallout from disputes between the US and its largest trading partners. Markets are now pricing in interest rate cuts consistent with softening economic expectations.  In Europe, the ECB has indicated that policy rates will be maintained at current (highly accommodative) levels at least through the first half of 2020 while also committing to reinvesting the principal payments from maturing debt securities purchased under the asset purchase program. It has also announced a new program of long term repo operations to preserve favorable bank lending conditions. Forecasts for growth and inflation in major advanced economies and associated monetary policy settings weigh heavily on financial market expectations and global investor preferences. Demand and pricing for AGS issuance is almost exclusively impacted by these wider market influences.

Domestic conditions are generally positive, albeit with some recent moderation in growth and subdued inflation. The Government’s forecast is for the fiscal position to continue improving which will see net AGS issuance approach zero and the AOFM’s funding program focused on the relatively more straightforward task of refinancing maturing debt. A notable challenge for the AOFM will be to support liquidity across the AGS market with declining issuance.

The RBA downgraded its central economic forecasts in February and May, citing an increased probability of scenarios where a decrease in the cash rate would be appropriate. At its June 2019 meeting, the RBA subsequently cut the cash rate by 25 basis points, following continued weakness in CPI prints and insufficient improvement in the labour market. This was followed up by a further 25 basis point cut in July. While these moves significantly reduced the gap between the RBA cash rate and prevailing term interest rates, markets continue to price a further cut by year end.. Market expectations of RBA decisions heavily influence yields on short dated AGS and the value of the Australian Dollar. With respect to long-dated AGS, AOFM currently estimates that the term premium is again close to zero (or even negative), suggesting that a long issuance bias can be maintained for now without significant penalty.

Geopolitical risks present an ongoing source of uncertainty and have the potential to impact the AOFM’s operations through a shock to economic growth, disruption of global capital markets or through sudden changes to investor sentiment. At the forefront of known risks for 2019‑20 is the continuing uncertainty in the US-China relationship with potential flashpoints around trade, territorial sovereignty (South China Sea and Taiwan) and corporate sanctions (Huawei for example) present.  Uncertainty stemming from the impending UK exit from the EU is likely to influence financial markets well into 2019‑20 while tensions in the Middle East may also be a focus for some global investors. On balance, rising geopolitical tensions tend to increase demand for safe securities (such as AGS) as part of a ‘flight to quality’, however, they also have the potential to sponsor dislocation between investor demand and issuer needs, at least in the short‑term.

Investor interest in AGS through the first half of 2019 has been reasonable albeit with some variation across different investor classes and at a time when the AOFM’s call on investors for funding is substantially below that of recent years. The 2019‑20 fiscal year could yet present some investor headwinds to the AOFM’s activities. The sharp appreciation in bond prices (falling yields) in combination with the diminished attractiveness of AGS relative to other markets (US Treasuries in particular) for example may continue to weaken the case for marginal dollar investment in AGS. This effect will be more pronounced for offshore investors who are hedging back into their local currency, where lower yields combined with higher hedging costs result in lower investment returns relative to investing in their own or other sovereign bond markets.

Planned Performance

The AOFM recognises it has limited influence over key drivers of the cost of the debt portfolio such as the amount of debt outstanding and the level of market yields.  It can influence the cost of the debt portfolio over time through the choice of securities and maturities it issues, which are influenced by considerations beyond cost (for example, market risks). There are also (cost and risk) benefits realised over time from market confidence in the AOFM. This is because investors form views of and are influenced by issuer reputation delivered in large part through consistency and transparency.

The AOFM’s task requires trade-offs between cost and risk but its overriding aim is to ensure that the Government’s financing requirements are met in full and on time. Underpinning this are considerations about maximising the likelihood of access to financial markets through a wide range of circumstances and maintaining business processes that reflect minimal appetite for failure in any critical function (such as successful execution and settlement of bond tenders, buy-backs and syndications). Since the onset of the global financial crisis reducing risk has tended to take primacy over cost, especially during a long period in which the Government’s financing task was consistently growing year-on-year. An improving fiscal outlook when the call on the market for financing is in decline will result in a different balance of consideration between risk and cost.

In terms of articulating those areas that should reflect interest in the combined effect of the circumstances under which the AOFM meets its responsibilities, the AOFM has chosen to use six indicators that cover three key considerations raised above: one is the cost effectiveness of its choices on portfolio management and issuance; another reflects its capacity to maintain market access to finance when required; and a third can be used to indicate how the AOFM influences its reputation in financial markets.

Reporting against these in the AOFM annual report will take into account the extent to which an appreciable deviation from the targets is a reflection of broader market changes, or decisions taken by the AOFM during the year, and why. While it is difficult for the AOFM to plan four years in advance because the financing task is only revealed at the Budget each year and global financial market conditions are almost impossible to anticipate and at the very least remain subject to volatility, the general outlook takes into account a range of scenarios that could impact the issuance task beyond the current year.  The performance measures in the table below are, however, applicable for the four reporting periods covered by this plan (subject to review annually to ensure they remain relevant). It is too early to devise a performance measure to best reflect progress toward achieving appropriate implementation of the ABSF program given its focus is on developing the SME lending sector.  This will take some time to identify.




Meet the budget financing task in a cost-effective manner subject to acceptable risk

Term issuance

Shortfall in volume ($) between actual Treasury Bond issuance and planned issuance announced at the Budget and subsequent releases.


Financing cost (portfolio)

The cost of the long-term debt portfolio compared to the 10-year average of the 10-year bond rate.


Financing cost (issuance)

The cost of Treasury Bond issuance over the past 12 months compared to the average 10-year bond rate over the same period.


Tender issuance yields

Weighted average issue yield at Treasury Bond and Treasury Indexed Bond tenders compared to prevailing mid-market secondary yields.

Issuance yields at or below the market rate

Facilitate the Government’s cash outlay requirements as and when they fall due

Use of the overdraft facility

Number of instances the RBA overdraft facility was utilised to the extent that it required Ministerial approval during the assessment period.


A credible custodian of the AGS market and other portfolio responsibilities

A liquid and efficient secondary market

Annual turnover in the secondary market for Treasury Bonds and Treasury Indexed Bonds.

Greater than previous year

Market commitments

Number of times the AOFM failed to take actions consistent with public announcements.


Risk Oversight and Management

The AOFM is committed to good governance principles and sound management practices, including a structured approach to the management of risk consistent with Commonwealth policy. The AOFM’s enterprise risk management framework highlights the need for the active and transparent management of risk (opportunities and threats). The framework facilitates a consistent approach to identifying and managing risk and helps to inform the focus and allocation of risk management effort.

AOFM risks are categorised as strategic, portfolio, or operational. Given the specialist nature of its core business, the AOFM has a particular focus on financial risk management, which applies to all financial and portfolio risks across the AOFM’s cash and debt portfolio management responsibilities and associated issuance activities. That said, this is not at the expense of ensuring appropriate oversight of strategic and operational risks.

Themes emerging from recent inquiries into elements of, or participants in, the financial services sector have served to highlight the need for maintaining an appropriate understanding of and ownership of non-financial/operational risks. In this regard AOFM recognises the need for and promotes a sound risk culture to enable effective risk management. Key learnings from these inquiries have been considered by the AOFM in the context of emerging operational risks and its regular reviews of internal practices to risk management.

The enterprise risk management framework is complemented by protective security, fraud control and business continuity management practices. The AOFM Audit Committee reviews the maturity of the AOFM’s governance, financial and risk management arrangements. In addition, it examines procedures for managing operational and financial risks. Internal assurance activities support the Audit Committee in discharging their responsibilities and monitor the effectiveness of the AOFM’s internal control framework in mitigating risks, as well as our adherence to obligations and commitments.

Each year the AOFM corporate planning process involves an assessment of relevant emerging risks. Commentary on these risks is provided in the ‘external environment’ and ‘strategic outlook’ sections of this plan and are considered in the context of the ‘key objectives’ section of this plan.  They are also incorporated into considerations about implementation of the AOFM workforce plan.

Capability and Strategies

Core operations

Business groups have developed operational plans for 2019-20. These detail the range of tasks and initiatives that each group will undertake in support of the AOFM achieving its core objectives.

Strategic outlook

AOFM objectives are guided by: the advancement of macroeconomic growth and stability; the effective operation of financial markets, through issuing debt; investing in financial assets; and managing debt, investments and cash for the Australian Government[1] . The annual focus is on meeting the Government’s financing requirements while managing the trade-offs between cost and risks for the cash and debt portfolios. To be successful in its roles as portfolio manager and issuer, the AOFM plans AGS issuance according to an annual debt management strategy that is endorsed by the Secretary to the Treasury and approved by the Treasurer.

The AOFM endeavours to maintain sufficient issuance flexibility to be able to respond appropriately to changes in its operating environment. The AOFM is also acutely aware of the need to monitor external factors, such as market conditions, that have the potential to impact its ability to meet the Government’s financing requirements. It does this through various means, including by liaising with a comprehensive and extensive network of domestic and offshore market contacts based on its relationships with intermediaries and investors.

Workforce planning

The AOFM is a specialised agency focused on sovereign financial and debt management. AOFM people develop credible high quality external relations, together with a strong appreciation of the importance of maintaining broad market and economic knowledge and information networks relevant to global financial markets.  AOFM retains in-house financial market skills and experience to advise other agencies (in particular Treasury and the Department of Finance) on costs and risks to the Government’s balance sheet. The Workforce Plan 2019-2023 aims to support a high performing culture through: (1) recruiting staff with high quality potential; (2) honing available technical skills; (3) enhancing internal industry and policy-related experiences; and (4) fostering deep and broad thinking appropriate to understanding the AOFM’s challenges.

AOFM aims to increase the tenure of high performing staff while creating a reputation as a destination of choice for high potential recruits (especially at the graduate level).

Key objectives for the financial year 2019-20 and three forward years

Key priorities for the reporting periods are:

  • delivering the Budget financing task through its Treasury Bond and Treasury Indexed Bond issuance programs;
  • delivering the cash management task – through managing the Australian Government’s daily cash position. Proactive engagement with key entities will continue to be pursued to ensure that reliable revenue receipts and forecast outlays are available.  Over the medium term the AOFM will look to enhance its cash management practices by leveraging technological advancements in payments infrastructure;
  • maintaining strong and productive relationships with intermediaries and investors to facilitate the effective delivery of the issuance program. The focus will be on: consulting market participants where decisions have the potential for impacting the market and the external view of AOFM as a responsible issuer; understanding shifts in investor demand preferences; and enhancing existing stakeholder engagement strategies to improve reach and transparency;
  • working with the Treasury on Government debt and associated financial policy related issues and regularly updating Treasury on issues of potential significance for fiscal or debt policy;
  • gathering market intelligence for analysis and dissemination within AOFM to inform the AOFM’s issuance strategy, through greater understanding of current demand dynamics;
  • ensuring AOFM has relevant input to the government’s adoption of the New Payments Platform;
  • investigating suitable opportunities to engage with offshore investors through forums and bank hosted conferences;
  • capitalising on business improvement opportunities, through leveraging system capabilities and reviewing critical functions to increase operational efficiencies and resilience; and
  • implementing and administering the ABSF, comprising a design and establishment phase during which the AOFM will determine and acquire the appropriate mix of internal and external expertise, and an operational phase, which will see the AOFM administer the investments within the ABSF.

Corporate projects

In previous years, the AOFM has identified projects, to be managed at the corporate level that will address emerging challenges for the agency as a whole and/or progress corporate priorities. These projects are determined on the basis that they are forward looking, require coordination and collaboration across the entity, and affect the way the entity operates as a whole.

The focus for 2019-20 will be implementing the ABSF. This is the most notable mandate expansion for the AOFM since the intervention in the Residential Mortgage Backed Securities market in 2008, and is expected to require significant resourcing.

A range of smaller, but important, business supporting projects will also attract Executive Group monitoring and support throughout the year.

[1] for more information see Outcome 1 for the AOFM as published in the Treasury Portfolio Budget Statements 2019-20